September 20, 2010

How Do You Treat a Recession? Try a Dose of Health Reform

The latest official statistics on income and poverty, which the government released last week, included some particularly alarming news about health insurance. From 2008 to 2009, the number of people with health insurance actually fell, for the first time since the Census began collecting such information, from 255.1 million to 253. 6 million. Meanwhile, the proportion of Americans without coverage reached 16.7 percent. That's a new high, up from 15.4 percent in the previous year.

Of course, you expect to see this sort of change in an economic downturn. When people lose their jobs, they typically lose their health insurance, too. But guess which state actually managed to reduce the number of people without health insurance, even as its unemployment rate was rising? Sure enough, it was Massachusetts, whose state-level expansions of health insurance are a model for what the Affordable Care Act will eventually do nationally.

From 2008 to 2009, the uninsurance rate in Massachusetts fell from 5.5 to 4.4 percent. As the graph here suggests, it was one of only a handful of states in which the uninsurance rate declined. And the other states with falling uninsurance rates have small populations, which means their statistics are subject to high sampling errors. (The exception is Louisiana and I have no idea what's going on there, although I suspect it has something to do either with the influx of post-Katrina health care funding or the ongoing out-migration of very poor people as the New Orleans area rebuilds.)

More important, though, the latest numbers from Massachusetts seem to illustrate an under-appreciated point that Robert Greenstein, of the Center on Budget and Policy Priorities, made in a conference call last week: Health care reform is an automatic anti-recession measure, because, during downturns, government ends up enrolling more people in Medicaid and providing more people with subsidies to pay for private insurance. Those are two effective forms of stimulus.

You hear a lot about how President Obama and the Democrats focused on health care, at the expense of the economy. This would seem to be a reminder that, to some extent, they were doing both at the same time.